How Bankers Avoid The Slammer

Bankers Are Too Big to Jail?

This week’s  financial industry news read more like crime news than financial. Bankers tinker with interest rates, game the banking system and launder money for people tied to criminal organizations and possibly terrorists. When caught, bankers “settle.”

Chartered Bank made headlines: Laundering Case Settled By Bank For $340 Million, New York Times, August 15, 2012, Page 1. The Financial Times celebrated with StanChart Rallies As Settlement Welcomed, August 16, 2012, Page 1. Standard Chartered was laundering money for a decade for the Iranian government.  Jon Corzine’s MF Global, which lost $1bn in customer money, made the front page: No Criminal Case Is Likely At Corzine Firm, New York Times, August 16, 2009, Page 1. The subhead said “Chaos and Porous Risk Controls Are Cited at MF Global.” Financial news or crime news?

How do they stay out of jail? Answer: When bad deeds surface, bankers invest in image management, friends in Congress and regulators who refrain from regulating. The usual tactics are

Plausible Deniability Top executives deny prior knowledge of activities like laundering, stripping, and rigging. Care is taken to leave no paper trails that lead to top execs.

No Law Was Broken If banking crime news gets out, lawyers issue statements that no laws were broken, but never state which laws they have in mind.

Minimize Damage If bad news persist, much, the dollar amount is rationalized, like oil companies reporting oil spills: The amount is relatively small, the damage controllable. Jamie Dimon (JP Morgan CEO) told Congress that a dumb error cost only $2bn in losses. After he spoke, the $2bn went from 5 to 8.)

Doing God’s Work If the going gets rough, there is the “Blankfein Defense”:  Lloyd Blankfein (Goldman Sachs CEO) claimed his institution was “doing God’s work” during the 2007-8 meltdown and thereafter. Interviewers never asked if he was hearing voices.

Magical Self-Correction The ultimate defense is that we suspend reason and have faith: The financial services market works in mysterious ways its miracles to perform.

Yes, bankers are too big to jail.


Tags: , , , , , , , , ,

Comments are closed.